Which Texas metros are best for real estate agents?Which Texas metros are best for real estate agents?Gerald KlassenKlassen
2018-05-16T05:00:00ZCenter News


Personal-finance website WalletHub released a report recently on "2018's Best Places to be a Real Estate Agent." They compared 179 U.S. cities on 18 key indicators of a healthy housing market. Each metro was measured by "job opportunity and competition" and "real estate market health."

Ranking 27th nationally, Austin was named the best city overall in Texas to be a real estate professional.

But hold on just a second. Can data alone determine which city is best for you to practice real estate?

There is a lot more to the equation than sales stats. WalletHub's methodology doesn't begin to answer the question because the best location for an agent depends on their own goals and needs.

If you are a career agent, you aren't going to be chasing the latest hot markets. You want to be in a stable place with long-term growth prospects, which might be different from the current hot markets.

If you are a mobile, single millennial looking for fast wealth, then you probably want to go to one of these "hot" markets with plenty of deals to go around with clients who just want transaction execution, not a relationship with their agent.

WalletHub's methodology is totally based on short-term or current metrics. Many of the high-ranking places now were the worst places from 2008-10. What type of property or transactions are you interested in doing? That's a career choice that may lead you somewhere other than one of the mainstream markets.

I don't know if agents do any strategic planning, but I would always recommend that they engage in some deep introspection and strategic planning before picking a market. They need to figure out if the chosen market will meet their personal goals and needs.

I spoke with a land broker near the coast last week. He came to the Center for an education program many years ago. It was where the Center brought in several experts from outside for a few days. He said the most important thing he learned was how to do strategic planning. It wasn't a technical thing related to appraisal but critical for the success of his business.

Keep following the Real Estate Center. You may see more about how to succeed with strategic planning.​

Everything's 'funner' in TexasEverything's 'funner' in TexasHayley RiederRieder

​​​​A view of the crown at Free Press Summer Fest with the Houston Skyline in the background

Texans already know how fun it is to live in the Lone Star State, but a WalletHub study backs us up, ranking Texas as the seventh most fun state in the nation. 

Texas tied for first with California, Florida, and New York for number of restaurants per capita. The state also ranked high in number of movie theaters per capita, tying for first with California and New York. Texas ranked fifth in number of fitness centers per capita.

But what else does Texas have to offer?

Texas doesn't disappoint when it comes to football. According to the NFL's 2017 rankings, the Dallas Cowboys are the most popular team in the U.S. (sorry, Texans fans). AT&T Stadium in Arlington is also the fifth largest in the NFL by capacity.

If college football is more your speed, Texas A&M's Kyle Field in College Station and the University of Texas' Darrell K. Royal–Texas Memorial Stadium in Austin are the third and eighth largest in the NCAA, respectively. 

Do you prefer music? Austin is known as the "Live Music Capital of the World." The city's music scene has produced legends like Janis Joplin, Stevie Ray Vaughn, and Willie Nelson. According to Forbes​, Texas has the fourth most music festivals per year (13). 

Popular amusement park chain Six Flags got its start with Six Flags over Texas in Arlington. Other properties owned by the chain are Six Flags Fiesta Texas and White Water Bay in San Antonio and Hurricane Harbor in Arlington. 

Everything is bigger in Texas, including our fairs. The State Fair of Texas welcomed over 2.4 million visitors in 2016, making it the largest by attendance in the U.S.

Big Bend National Park in West Texas has national significance as the largest protected area ​of Chihuahuan Desert topography and ecology in the country. It contains over 1,200 species of plants, 450 species of birds, 56 species of reptiles, and 75 species of mammals.​

Of course, Texas has many other amazing attractions, state parks, and more, but we'd be here all summer if we went through them all.

Texas housing affordability waningTexas housing affordability waningLuis TorresTorres

​​​​​​​​​March data show Texas' housing affordability remained favorable compared to other states but hovered around a decade low. Rapid price appreciation, fueled by shortages of homes priced under $300,000, challenged Texas homebuyers. Stagnant wages struggled to keep pace with home values, holding the Texas Housing Affordability Index at 1.5.

The index shows a family earning the median income in Texas could afford a home 50 percent more than the median sale price. For much of the past decade, Texans enjoyed the capability of affording homes priced twice that of the median.

Affordability issues persisted in Austin and Dallas, with indices around 1.5 and 1.4, respectively. The Houston index extended a year-long trend at 1.7, while San Antonio ticked up to 1.6. Fort Worth boasted the highest affordability conditions at just above 1.7, despite observing some of the largest home price appreciation.

The Texas median home price balanced around $231,600 amid mixed movements in the new- and existing-home markets. The median price for resale homes reached a record-high $223,675—a $15,000 increase since March of last year. Softer demand simmered the price for new homes, holding the median around $293,000.

Price pressures picked up in North Texas after a moderate start to the year. The median price rose 1.7 percent YTD in both Dallas and Fort Worth to $286,200 and $230,200, respectively. Austin maintained the highest median home price at $298,100 but had a 2.1 percent decrease YTD.

Suppressed new-home values in Houston, a trend that pre-dates last year's hurricane, offset steady appreciation for resale homes and held the aggregate median price around $230,000. San Antonio offered the lowest median price at $220,700 but maintained a clear upward trend.

The statewide median price per square foot (ppsf) rose for the tenth consecutive month, surpassing $115. The combination of regional economic growth and scarce land lifted the Austin and Dallas ppsf above $154 and $132, respectively.

Fort Worth posted the largest percentage increase in median ppsf at 10.5 percent YOY, reaching a record high $117.48. In San Antonio, the median ppsf rose 5.9 percent YOY to $112.37 and could soon surpass the statewide level. Houston maintained the lowest ppsf at $107.41 and the smallest annual growth at 3.3 percent, thereby widening its price gap from the other major metros.

For more, read the Real Estate Center's latest Texas Housing Insight.​​​​

Texas bucks best-month-to-sell-a-house trendTexas bucks best-month-to-sell-a-house trendDavid S JonesJones, D.


​May is the best month to sell a house if you live in Washington, D.C.; San Francisco; St. Louis; Denver; or Pittsburgh. Penn. In Texas, however, January is when sellers realize the biggest premium above estimated market value.

A study released today by Attom Data Solutions studied 14.7 million home sales from 2011 to 2017. The report says nationally the best day of the year to sell a home is June 28 when the average seller premium is 9.1 percent.

Warm weather markets in Texas, southern Florida, and Arizona buck the trend. See the interactive heat map.

January is the best month for Texas' sellers in four of the five Metropolitan Statistical Areas (MSAs) studied.

Sellers in San Antonio-New Braunfels average a whopping 17.2 percent more in the first month of the year. Elsewhere, Dallas-Fort Worth-Arlington sellers receive an average 7.9 percent more that month. Houston-The Woodlands-Sugar Land sellers average 9.8 percent more while those in Austin-Round Rock average 7.2 percent.

In El Paso, however, August is the most profitable month with sellers averaging 10 percent more than the estimated market value.

Here's an infographic of the top five best days to sell nationally. Keep in mind, Texas is different.

Why do Texas homes sell for more in January? Send your thoughts to us at info@recenter.tamu.edu​.

More people are coming to Texas, but do we have enough homes?More people are coming to Texas, but do we have enough homes?Bryan PopePope

​​​​​Texas' population grew by more than 1,000 people a day last year, according to U.S. Census data. That's great news for the state's economy, but it raises a question: Where are all these new people finding housing? ​​

​Our latest Texas Housing Insight report shows the state had a 3.4-month supply of new and existing single-family homes for sale in February, a 28-year record low for the state. This means it would take 3.4 months for homes listed for sale​​​ to sell at the market's current pace. The Center considers a six-to 6.5-months supply a balanced market.

I asked Center Research Economist Dr. Luis Torres about this. He coauthors the monthly housing report.

"Existing homes have been in short supply for a while," he said. “The big difference is that now the shortage of new homes is more pronounced."

Statewide, new-home permits were down 2.6 percent in February even though they maintained upward momentum from last year. Although Texas led the U.S. in permits issued and accounted for more than 17 percent of the national total, permits per capita remained more than 36 percent below the state's prerecession levels.

"Building permits peaked in 2007, and they've never come back," Torres said.

Meanwhile, housing starts were 39.5 percent below prerecession levels.

​While demand for new homes is high, Torres said many builders are hampered by a number of supply constraints and new building regulations.

"The lack of land available for development has hurt new-home construction," he said. "There's a small supply of land for building new homes, and demand is high. That pushes up land prices and makes it more costly to build a new home."

In fact, Torres said land accounts for roughly 20 percent or more of the cost of new-home construction.

"If I'm a homebuilder and the land is expensive, for profit reasons I'm going to build a bigger, more expensive house," he said. "That's suppressing the lower end of the market."

Torres said high land costs are especially problematic for medium and smaller builders who might have less access to credit than the larger builders, making it harder to buy land.

Lumber and labor costs are also hindering new construction.

"The U.S. imposes tariffs on Canadian lumber, which adds to building costs," Torres said. "Also, there's a shortage of qualified, skilled laborers. When the housing bust happened about ten years ago, many laborers left the construction industry. It's difficult to replenish them. Builders and subcontractors are struggling to find skilled laborers even with wages increasing."

Torres said new building regulations are causing difficulties for builders.

"New regulations increase costs, and those will be passed on to the consumer," he said.

Houston's city council passed a regulation yesterday requiring new homes built in the flood plain to be elevated. Torres said regulations such as these will be important because of the impact they could have on the new-home market.​

Torres talked more about this on yesterday's Real Estate Red Zone podcast. Click here to listen.

The cost of building regulationsThe cost of building regulationsLuis TorresTorres
2018-03-29T05:00:00ZInfrastructure & Transportation
​​​The City of Houston has proposed new regulations for home construction (500-year flood plus two feet) in response to Hurricane Harvey. Local governments need to be aware that modifying homebuilding regulations influences the amount, location, and type of residential development.

More regulation is sometimes regarded as a less expensive solution than fixing a city's infrastructure problems. It's also viewed as a solution that can be paid for by the private sector.​ However, Houston's public works department reports that 70 percent of homes in the 100-year flood plain did not flood. So current regulations could actually be working, meaning the problem has more to do with infrastructure.

Building regulations come with economic implications. For example, they can lead to higher construction costs and time delays that restrict the ease of building houses. This can affect housing supply. In addition, cost increases are passed on to the consumer, making homes less affordable.

Regulations also create an incentive to produce more custom homes rather than to build in bulk.

When discussing solutions to Houston's recurring flood problems, policymakers should note which areas are most impacted. While researching our latest Tierra Grande article, “Imperfect Storm,” we found the highest proportion of housing damage occurred northeast of downtown in economically disadvantaged neighborhoods. These regions consist primarily of existing homes, suggesting that new building regulations may have little impact on the most vulnerable areas.

Also, many residents there might have a difficult time financing housing modifications, such as physically elevating homes, to comply with proposed building codes. As a result, they could be forced to move.
NAFTA, tariffs, and other trade deficit 'solutions'NAFTA, tariffs, and other trade deficit 'solutions'Luis TorresTorres
automobile assembly line
Arguments to solve trade deficits by opposing free trade agreements like NAFTA or imposing steel and aluminum tariffs forget the underlying macroeconomic forces of why countries like the U.S. have trade deficits.

Notes from any “principle of macroeconomics” course show you that when a country has a trade deficit the amount of savings in that country is less than the amount of investment. To finance the difference, a country uses foreign savings (i.e., foreign capital). This means if you want to decrease a trade deficit, you would have to increase savings or decrease investment.

For the U.S. to increase savings, consumption would have to decrease, which would probably cause economic growth to slow in the short run. Think about it. We would postpone current consumption for future consumption. That is what we do when we save. But increasing savings in a country that likes to consume is no easy task.

What if we try decreasing investment instead? Companies would not purchase machinery and equipment, affecting short-run and long-run economic growth.

Let’s say we eliminate NAFTA and impose tariffs on steel and aluminum imports. Would that lead to an increase in U.S. savings? Probably not because the amount of savings depends on incomes and savings rates. Eliminating NAFTA and imposing tariffs would not have a lasting effect on the trade deficit because the underlying cause of the trade deficit is investing more than saving.
Happy Burst-Day, Housing Bubble!Happy Burst-Day, Housing Bubble!Luis B. Torres and Wesley MillerTorres


Ten years ago, the United States was in the midst of a subprime-mortgage and ensuing housing crisis. Recessionary pains from the worst downturn since the Great Depression reverberated throughout the country, but a multitude of factors shielded most of the Texas housing market.

In terms of housing finance, Texas' relatively conservative lending standards allayed somewhat the number of foreclosures and strengthened underlying market fundamentals. The state was relatively slow to allow home-equity lending. Home-equity lending increased in national popularity in the late 1980s and 1990s. Texas, however, first allowed home-equity lending in 1997 and restricted the total of all mortgage debt (not just the home equity loan) from exceeding 80 percent of the home's fair-market value. In contrast, many of the most afflicted states placed no such restrictions.

Texas' relatively abundant supply of land combined with liberal zoning and building restrictions kept supply in balance with demand. The laissez-faire emphasis to urban development deterred market distortions and artificial price appreciation that propagated elsewhere. Texas home prices rose steadily in the early 2000s but trailed the ballooning national average. A prolonged statewide recession between 2001 and 2003 further hindered Texas home price appreciation prior to the 2008–09 housing crisis.

'Pop' Goes the Bubble

When the housing bubble burst in late 2007, Texas prices had less distance to fall and benefitted from stronger market fundamentals. The state recovered before most of the nation, thanks to the energy sector boom in 2011. Rapid economic growth continued through 2014 until the price of oil collapsed amid global crude surpluses. Unlike the 1985 oil bust, the state's economic diversity cushioned the slowdown, thereby allowing the housing market to maintain its steady march.

As the business-cycle expansion advances, it is useful to consider the progress made, as well as the problems developed since the housing crisis. The post-recession performance of the Texas housing market is further considered in the following analysis.

​Home Sales Plummet and Rebound

Texas housing sales began falling in January 2007, crashing 27 percent before the implementation of the “Making Homes Affordable" mortgage modification program in 2009. The stimulus artificially lifted sales for seven months before reverting to its downward trend for an additional year. After a 32 percent aggregate decline, sales hit bottom in December 2010.

The 2011 shale oil boom sparked Texas' economic revival, propelling home sales for 18 months. Rapid growth continued until the Federal Reserve's tapering policy spiked mortgage rates in summer 2013. Following the market adjustment, sales embarked on their current long-run expansion, displaying impressive resilience despite affordable housing shortages and falling oil prices in 2015 and 2016. However, housing sales per capita remained 7 percent below pre-recessionary levels as the Texas homeownership rate hit an all-time low in 2017.

Homeownership Falls, Foreclosures Rise

The Great Recession coincided with a national decline in the rate of homeownership. However, this secular downturn stemmed more from an overall aging population and obstacles hindering first-time homebuyers (e.g. student debt, strict lending requirements, and a shortage of entry-priced homes).

Texas homeownership varied widely during the recession but continued the overall downward trend. This trend continued during the recovery phase of the business cycle, sinking below 62 percent in 2014—the lowest since 1999—as more young people moved to the state and became renters.

The number of foreclosures peaked in first quarter 2010 but were 2.5 percent lower than the national rate. The Texas rate remained elevated until 2012 and now sits around 1980s levels of less than 0.6 percent.

Diminished Purchasing Power​

Job losses and wage reductions during the recession drove up foreclosures as more Texans struggled to stay afloat. After a year-and-a-half contraction, the business cycle turned and accelerated during the fracking boom. Texas income per capita fully recovered by the end of 2011 and shifted into second gear in 2014. However, an oil price collapse late in the year shocked income growth, and today's prolonged period of income stagnation began.

Housing prices flattened for three years during the recession, an amazing fact given the 21 percent national contraction. In the recovery phase, income growth outpaced home prices, adding to the state's affordability advantages. Surprisingly, price appreciation kept pace despite the 2015-16 economic stumble, which diminished much of Texans' purchasing power. The divergence of incomes and home prices presents real challenges to future growth in Texas' housing markets.

Housing Stock Rocked

An unprecedentedly low housing supply contributed to rapid home price appreciation. Prior to the recession, the Texas housing market was stable at around five to six months of inventory. Inventories peaked before the economic boom in 2011. By 2014, the supply of active listings was below four months. The months of inventory for homes priced under $300,000 averaged just 3.1 months. This price range accounts for 70 percent of homes sold through Multiple Listing Services and highlights the severity of today's shortages.

Homebuilders have responded to market imbalances but output remains far below its pre-crisis peak in per-capita terms. Rising land, labor, and input costs strain builders' ability to build homes in the most-demanded price range. That said, Texas per-capita permits reached 58 percent of its peak level in 2017, while national permits failed to issue half the pre-crisis amount.

Summary: Unsustainable Divergence

The Texas housing market successfully weathered the Great Recession and the housing bubble burst that tormented regional economies across the nation. In 2011, technological advancements in the energy sector propelled the Texas market forward, but supply-side constraints have prevented a full-scale recovery.

Texas' affordability advantage contracted as inventory shortages elevated home prices, thereby straining stagnant incomes. The divergence between home prices and incomes is unsustainable and will become increasingly problematic if unresolved. Improvements must be made in suppliers' ability to build homes priced between $200,000 and $300,000. On the demand side, the state must continue to foster economic and technological innovation to boost Texans' productivity and incomes. The simultaneous growth of the housing market and the economy remains critical to Texas' overall prosperity.

To view this article with explanatory graphs, click here​


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